Oil had a big drop Tuesday. Does that mean that the current advance in oil is over? We don’t think so, and the reason why has to do with cycles, which we will explain.
SPY may have had a false breakout above 393, a concern but the formation needs to be completed to be valid. A close below 386 would tend to confirm this. QQQ is in an interesting and vulnerable position, and while a move above 328 would repair the chart that is unlikely without another test of 300.
This week is options expiration for March, and we expect a volatile, up and down week as the Federal Reserve (Fed) is out with comments. We have had a downside target of 160 or so on GLD that we thought it would be hit in the second half of 2021. Accumulation models remain weak, but do have some bottoming signs, the first in several months.
Friday’s reversal notwithstanding, we are seeing some signs of technical weakness that are resolving some of the overbought condition intermediate-term. Friday’s action was encouraging and positive, but big up days/reversals in these sideways trends are often a sign that the decline is not over and can be retraced. A move on TLT back above 140 would be strong at this juncture.
TLT is interesting as it is now holding the 140-area. It has been a bit weaker than we thought it would be, but now looks ready to start an advance to 147, as long as it can remain above 139.
The same themes we have noted over the last few months have been apparent in the accumulation models – small cap continues to look stronger and tech a bit weaker. PSCE may pull back into the end of the quarter, if our market forecast is correct, but has real room to run for speculative players.
The decline has been selective, with QQQ and the Tech’s correcting more than other groups, while XLF, XLE, and XLI are rallying while this goes on. SPY can still approach the 373 area by the end of March, but this move is so choppy, it is difficult to short and should continue this way.
The market is acting tired, and we still believe that a pullback into the end of the first quarter is possible, and this should retest the 370 area on SPY or below by the end of March. We ran our Accumulation Models, and these continue to show IWM, IJR, and even MDY as the best areas to look for performance.
One of the most interesting things we have noticed the last couple of weeks as we have been working with data from Barron’s is that there has been a surge in up volume in the NASDAQ. The Agricultural Commodities have continued to advance but now have some signs that a consolidation is likely.
India has been acting very well here and is one of our favorite International Markets. The Nikkei 225 is continuing the advance from last year and remains a very strong rounding bottom chart.
This week is likely to be similar to last week: choppy and may generate a sell signal for expiration week. Gold had a bad week last week, and the trading has pretty much negated the daily and weekly stochastic buy signals we had coming into the week.
Stocks have rallied as we mentioned they could in the weekly. Now, if we are correct, stocks will open up, and then sell off. We continue to be nervous about the metals.
SPY has first support here at 360, and with a McClellan Oscillator reading around -200 there should be a bit of rally here. The treasury yield charts say a rise in rates over the next month or two is likely.
We have no changes in our stock or bond outlook as expressed in the weekly. We remain longer-term bullish but concerned that we have entered a corrective phase.
Stocks look to open the week flat as earnings season picks up speed, and we expect a choppy week. GDX is an intermediate-term flag formation that has pulled back into support, and it has daily and weekly stochastic recycles.
As mentioned in our yearly forecast, a down first quarter would set up a rally. We don’t have a big sell signal, but rather a suggestion that the market needs to rest. We probably won’t be as volatile as we were in 2020, but advisors should be prepared for some stock market pullback in this area. We would use this to add to small cap as the accumulation model is still the strongest of the major indexes.
TLT hit our first main downside target at 150 and held it, so some bounce is possible here. CORN is more of a base and is further from resistance. It is also a bigger crop, so this market may be the one to really watch.
We have advocated selling trading, but not investing, positions. SPY should not go below 341 but will most likely hold 350 or so. EWJ this is very strong, and we think it could be one of the best international performers of 2021.
